Monthly returns are each calendar month's P&L against your capital, as a percentage. Their point is not the total they add up to, it is their resemblance from one month to the next: twelve months that look alike are worth more than one exceptional month and eleven flat ones.
The mean, and the spread around it
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Monthly returns cut your performance into calendar months and relate each to a reference capital. It is the most readable slicing of a year: wide enough to smooth out extreme days, fine enough for a drift to show before the year is over.
What is called consistency is simply how much those twelve numbers resemble each other. A trader making +1.5% every month and one making +18% in a month and nothing the rest of the year end up in the same place, and nobody would judge them alike. The second has not demonstrated much.
That distinction is not theoretical, it is contractual at many prop firms: a share of the gain too concentrated on a single period fails a funded account, even in profit. The rule is often called a consistency rule, and it is measured on exactly these figures.
Monthly return = month's P&L ÷ reference capital × 100
The reference capital is a choice: start-of-year balance, start-of-month balance, or average capital. All three give different series, and the harshest is the one restarting from the start-of-year balance.
Deposits and withdrawals distort everything if they are not removed from the calculation. A $5,000 transfer taken for a gain turns a flat month into an excellent one.
Prop firms' consistency rule is not always measured on months: many compute it on the best day against total gain. The principle is the same, the window is not, and it is for the contract to say.
| Share of the best month | What it describes |
|---|---|
| under 20% | Very regular. The result comes from repetition, not from one opportunity. |
| 20 to 35% | Normal for discretionary trading over twelve months. |
| 35 to 50% | Concentrated. Half the year was decided in one month, and you need to know why. |
| above 50% | The rest of the year produced nothing. That is not a method, it is an opportunity taken. |
| negative annual gain | The calculation stops meaning anything: one positive month's share of a negative total describes nothing. |
The table reads with a caveat that matters more than the thresholds themselves: twelve points is very few. A year of monthly returns is a tiny sample, and a series that looks regular may be so by chance. These thresholds serve to decide on funding, not to conclude a method is good, and confusing the two is the most common way of overrating yourself.
The second point concerns the reference capital, which is almost never stated. Relating each month to the start-of-year balance produces percentages that mechanically rise as the account grows; relating them to the month's balance gives a stable but less flattering series. Two traders publishing their monthly returns almost never measure the same thing.
The best month represents 30% of the annual gain. That is high without being abnormal, and it is the limit many prop firms set between 25 and 40% depending on the house. So this series would scrape through at some and fail at others, with exactly the same performance.
This is the most concrete use, and it can be quantified before even paying for a challenge. Take your best month, divide it by your total gain, compare with the limit the house announces. If you exceed it, the account will fail even while in profit, and that information is worth the price of the challenge.
Watch the window: some houses measure on the best day rather than the best month, which is far harsher. The contract says so, and it is the only source that counts.
A monthly series degrading gradually is visible long before an annual review reveals it. Three consecutive months of relative decline say something the annual total will keep hiding for months.
It is the right rhythm for this kind of check: the day is too noisy to conclude on, the year too slow to correct, and the month sits exactly between the two.
The first flaw is the sample, and it is structural: a year is only twelve points. No serious statistic is drawn from twelve observations, and yet monthly returns are published as if they demonstrated something. They describe what happened, they predict nothing, and the difference is rarely drawn.
The second is the unstated reference capital. Start of year, start of month, average capital: three conventions, three series, and almost nobody states which. A monthly return published without its base is a figure that can be neither checked nor compared.
The third is confusing consistency with skill. A regular series can come from a calm market, a modest position size or chance, and it often degrades as soon as conditions change. Consistency is a quality of the observed series, not a property of the trader who produced it.
The classic mistake. Counting a deposit as a gain. The balance rises the same way in both cases, so a transfer turns a flat month into the year's best, and the whole consistency reading collapses with nothing flagging it. Capital movements are removed from the calculation before anything else.
| Indicator | Formula | What it measures | When to use it |
|---|---|---|---|
| Monthly returns | month's P&L ÷ capital | Regularity, month by month | Checking a consistency rule |
| Sharpe ratio | mean ÷ standard deviation | The same regularity, in one number | Comparing two methods at equal return |
| Total return | net P&L ÷ starting capital | The result, without the path | Saying what the period returned |
| Maximum drawdown | (peak − trough) ÷ peak | The worst decline, not regularity | Sizing positions |
Best month divided by total gain, compared with the limit the house announces. The calculation takes two minutes and it says whether a funded account would fail even while in profit. It is the cheapest and least often checked piece of information on the prop firm path.
Start of year, start of month or average capital: all three are defensible, changing mid-course is not. With no fixed base, a monthly series compares neither with your own from last year nor with anybody else's.
A transfer counted as a gain manufactures an excellent month that has nothing to do with trading. It is the crudest error in this statistic, and it is frequent because the balance rises the same way in both cases.
They are each calendar month's P&L against your reference capital, as a percentage. The series of a year's twelve months serves to judge the regularity of a performance rather than its total.
How much the months resemble each other. A trader steady at +1.5% a month and one making +18% in a month and nothing the rest of the year reach the same total, and only the first has demonstrated a method. Many prop firms make it a contractual rule.
Divide your best month by your total gain over the period, and compare with the limit the house announces, often between 25 and 40%. Careful: some measure on the best day rather than the best month, which is far harsher. Only the contract counts.
Three conventions exist: the start-of-year balance, the start-of-month balance, or average capital. All three are defensible and give different series. What matters is choosing one, writing it down, and never changing it, because a monthly return without its base compares to nothing.
No, and that is the most widespread confusion on this subject. Twelve months is twelve observations, which is a tiny sample: a regular series can be so by chance, or because the market was calm. Consistency describes the observed series, it does not demonstrate skill.
Monthly returns are displayed in the Track record widget on the dashboard, one block per calendar month, below the performance summary. They are computed from each month's P&L drawn from your trades, fees included, with nothing to type in.
The check described above happens in the same screen: the best month's share is read by comparing the tallest block with the total return displayed just above. And for the other form of the same measure, the Reports screen gives the Sharpe ratio, which sums that regularity up in a single number.
To go deeper on this: read the full guide. Every term is gathered in the glossary.